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The government's decision to increase import duty on sugar from 40 per cent to 50 per cent is expected to support near term domestic sugar prices, a report said.

The Centre has recently increased the import duty on sugar from 40 per cent to 50 per cent following the recent decline in the global sugar prices and improved outlook for domestic sugar production for the coming sugar seasonSY2018. This move is likely to support the domestic sugar prices in the near term, ICRA said in its report here.

Global sugar prices have largely followed expectations on global supplies. The lower sugar import demand from India, coupled with an expectation of a global surplus in 2017/18 on account of increased production from Brazil and India, has resulted in a decline in the global sugar prices from around USD 540-550 per million tonnes (MT) in January-February 2017 to USD 510/MT in March 2017 and further down to USD 445/MT in May 2017.

"The recent hike in the import duty to 50 per cent is a positive for the industry which is likely to support the domestic prices in the near term.

This in turn will help sugar mills clear cane arrears to farmers. Given the recent increase in the fair and remunerative (FRP)cane price for the coming season, a significant fall in domestic sugar prices, was a possibility had further imports (in addition to the recent 0.5 million MT duty free imports) been allowed, same could have adversely impacted the margins and the liquidity of sugar mills," ICRA Ratings Senior Vice President & Group Head Sabyasachi Majumdar said.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)